Correlation Between Fubon Financial and Tai Tung
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and Tai Tung at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fubon Financial and Tai Tung into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon Financial Holding and Tai Tung Communication, you can compare the effects of market volatilities on Fubon Financial and Tai Tung and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fubon Financial with a short position of Tai Tung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Tai Tung.
Diversification Opportunities for Fubon Financial and Tai Tung
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fubon and Tai is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Tai Tung Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tai Tung Communication and Fubon Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fubon Financial Holding are associated (or correlated) with Tai Tung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tai Tung Communication has no effect on the direction of Fubon Financial i.e., Fubon Financial and Tai Tung go up and down completely randomly.
Pair Corralation between Fubon Financial and Tai Tung
Assuming the 90 days trading horizon Fubon Financial is expected to generate 1.73 times less return on investment than Tai Tung. But when comparing it to its historical volatility, Fubon Financial Holding is 2.39 times less risky than Tai Tung. It trades about 0.08 of its potential returns per unit of risk. Tai Tung Communication is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,540 in Tai Tung Communication on August 25, 2024 and sell it today you would earn a total of 1,185 from holding Tai Tung Communication or generate 76.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Fubon Financial Holding vs. Tai Tung Communication
Performance |
| Timeline |
| Fubon Financial Holding |
| Tai Tung Communication |
Fubon Financial and Tai Tung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and Tai Tung
The main advantage of trading using opposite Fubon Financial and Tai Tung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, Tai Tung can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tai Tung will offset losses from the drop in Tai Tung's long position.| Fubon Financial vs. Tai Tung Communication | Fubon Financial vs. Tang Eng Iron | Fubon Financial vs. Cameo Communications | Fubon Financial vs. Chung Hung Steel |
| Tai Tung vs. Novatek Microelectronics Corp | Tai Tung vs. Quanta Computer | Tai Tung vs. United Microelectronics |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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